22nd Sep 2006 07:01
InterQuest Group PLC22 September 2006 InterQuest Group plcINTERIM REPORTFOR THE PERIOD ENDED30 JUNE 20061 January 2005 30 June 2004 Financial Highlights Sales up 79.3% to £22,516,000 (2005: £12,559,000) Gross profit up 60.0% to £3,709,000 (2005: £2,318,000) EBITA (before FRS 20 share based payment charges) up 57.8% to £1,210,000 (2005:£767,000) Operating profit up 53.4% to £936,000 (2005: £610,000) Profit before taxation up 47.0% to £807,000 (2005: £549,000) Basic adjusted earnings per share up 16.0% to 2.9 pence (2005: 2.5 pence) Basic earnings per share unchanged at 1.9 pence (2005: 1.9 pence) Commenting on the results, Gary Ashworth, chairman of InterQuest said, "Havingbeen a publicly quoted company just 16 months we are beginning to earn therecognition of the market. We now have seven niche recruitment businessesfocusing on Information Technology, the core constituent of modern business.Given the two recent acquisitions we have made, profits will be weighted to thesecond half and I am confident we will meet our targets." Business Highlights InterQuest is pleased to present interim results for the six months to 30 June2006. The first half of 2006 has been a very busy period for the Group. We have seensolid growth plus a step change in the scale of the business as a result of theacquisitions of PeopleCo Worldwide Limited on 28 February and Sand ResourcesLimited on 8 June. Both have bedded down well under the InterQuest umbrella. Thesecond newcomer Sand Resources has only been part of the Group since early Juneand therefore did not make a meaningful financial contribution in the periodreported. However, we are pleased that since joining the Group Sand Resources' Catalistaccreditation has been extended by the Office of Government Commerce for theprovision of interim management professionals to public sector organisations.This is in addition to the accreditation for the provision of IT specialistcontractors, which was awarded earlier in the year. Sand is one of a selectnumber of twelve companies with this accreditation. Both Catalist accreditationsare now in place, which bodes well for the appointment of interim management andspecialist IT contractors in the public sector during 2007 and beyond. Meanwhile, our focus has been on building the reliable business of contractstaffing whilst at the same time as maintaining permanent placements, which haveremained steady. This has produced excellent results. On 1 January we had 362contractors working for clients. By the end of the first half that had increasedto 713, of which organic growth accounted for a 20% increase. Since the end ofthe interim accounting period the number has increased organically to 760. Wehave maintained our margins and, in fact, are now benefiting from some impact ofwage inflation. PeopleCo, acquired at the beginning of March is already making an impact on theGroup's bottom line and now accounts for about a quarter of the enlargedbusiness. Since June we have upgraded our accounting systems to cope with the newacquisitions. An area in which we are particularly proud is the growing strength of ouracademy development programme for new recruits into the industry, which hasconsistently delivered new fee earners into the different business units. Whilst the business environment remains benign we expect to meet all our targetsfor the full year and are confident we will continue to build critical mass in agrowing IT marketplace. Cash Flow At the start of the year, the Group had net cash of £1.3m. Despite funding thecontractor growth described above, the Group generated £0.3m from operatingactivities during the first half of the year. £6.2m was invested in the twoacquisitions and £0.2m was used to pay interest and tax and purchase fixedassets. The net cash outflow for the period of £6.1m was funded from the Group'strade debtor finance arrangements. The Group's net debt at 30 June 2006 was£4.8m. Earnings per Share In order to provide a cash based earning per share figure we have presented abasic adjusted figure excluding amortisation and the FRS20 share based paymentcharge. This is 2.9 pence in the first six months of 2006 compared to 2.5 pencein the first six months of 2005 (restated to a normalised tax charge). Basicearnings per share is unchanged at 1.9 pence per share which reflects the fulltax charge booked this year compared to the reduced tax charge in 2005 (due torecognition of a deferred tax asset in respect of recoverable losses and capitalallowances). Gary Ashworth Ross EadesChairman Chief Executive For further information please contact: Gary Ashworth, ChairmanRoss Eades, Chief Executive OfficerMichael Joyce, Finance Director020 7025 0100 Tim Blackstone, Britton Financial PR020 7251 2544 Notes (Unaudited) (Unaudited, (Audited, restated) restated) 6 months ended 6 months 12 months 30 June 2006 ended 30 ended 31 June 2005 December 2005 £ £ £ TurnoverContinuing operations 16,414,870 12,558,585 24,785,868Acquisitions 6,101,320 - 2,812,981 22,516,190 12,558,585 27,598,849 Cost of sales (18,807,183) (10,240,746) (22,704,979) Gross profit 3,709,007 2,317,839 4,893,870 Goodwill amortisation (226,948) (130,590) (284,131)FRS 20 share based payment charge (46,769) (26,876) (67,947)Administrative expenses (2,499,189) (1,550,562) (3,160,094) Total administrative expenses (2,772,906) (1,708,028) (3,512,172) Operating profitContinuing operations 643,053 609,811 1,283,766Acquisitions 293,048 - 97,932 936,101 609,811 1,381,698 Interest payable (129,126) (60,678) (87,324)Interest receivable - - 8,206 Profit on ordinary activities 806,975 549,133 1,302,580before taxation Tax on profit on ordinary 2 (292,538) (144,848) 301,829activities Profit retained and transferred to 514,437 404,285 1,604,409reserves Earnings per shareBasic 3 1.9 pence 1.9 pence 6.8 penceDiluted 3 1.8 pence 1.8 pence 6.4 pence Adjusted earnings per shareBasic 3 2.9 pence 2.5 pence 5.7 penceDiluted 3 2.7 pence 2.3 pence 5.3 pence Notes (Unaudited) (Unaudited, (Audited, restated) restated) As at 30 June As at 30 June As at 31 2006 2005 December 2005 £ £ £Fixed assetsIntangible assets 4 11,914,262 5,852,672 5,053,895Tangible assets 220,079 171,645 158,837 12,134,341 6,024,317 5,212,732 Current assetsDebtors 12,457,510 5,576,462 5,586,808Cash at bank and in hand 975,589 1,188,678 1,316,873 13,433,099 6,765,140 6,903,681 Creditors: amounts falling due (13,387,167) (4,310,899) (3,196,660)within one yearNet current assets 45,932 2,454,241 3,707,021Total assets less current 12,180,273 8,478,558 8,919,753liabilitiesCreditors: amounts falling due (1,258,611) (800,000) -after more than one yearNet assets 10,921,662 7,678,558 8,919,753Capital and reservesCalled up share capital 283,606 257,568 257,568Share premium account 7,219,826 5,955,161 5,955,161Shares to be issued 150,000 - -Profit and loss account 3,120,173 1,405,612 2,605,736Share based payment reserve 148,057 60,217 101,288Equity shareholders' funds 10,921,662 7,678,558 8,919,753 £ £ £Net cash inflow from operating activities 5 306,442 528,639 1,329,049Returns on investments and servicing offinanceInterest paid (129,126) (60,678) (87,324)Interest received - - 8,206 Taxation (18,671) - (407,303) Capital expenditurePayments to acquire tangible fixed assets (20,564) (6,047) (26,797)Acquisitions and disposalsPurchase of subsidiary undertaking in the 7 (5,964,056) (400,000) (496,854)periodPurchase of subsidiary undertaking in the - (1,100,000) (1,228,868)prior periodNet cash / (trade debtor finance) acquired 7with subsidiary undertakings (270,377) (299,369) (299,369) (6,234,433) (1,799,369) (2,025,091) Net cash (outflow) before financing (6,096,352) (1,337,455) (1,209,260)FinancingIssue of ordinary share capital net of 7 28,800 2,603,436 2,603,436expensesNet increase/(decrease) in trade debtor 5,726,268 (688,542) (688,542)finance facilities 5,755,068 1,914,894 1,914,894 (Decrease)/increase in cash (341,284) 577,439 705,634 1. Basis of Preparation The interim financial information has been prepared in accordance with the principal accounting policies of the Group as set out in the Group's 2005 annual report and financial statements except for the adoption of FRS 20 "Share based payments" and the presentational requirements of FRS 25 "Financial Instruments: Disclosure and Presentation". The Group has applied the requirements of FRS 20 Share-based Payment, in accordance with the transitional provisions, to all equity instruments granted after 7 November 2002 and unvested at 1 January 2006. The financial information set out in this report does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The figures for the year ended 31 December 2005 have been extracted from the statutory accounts, which have been filed with the Registrar of Companies subject to the prior year adjustment described in note 8. The auditors' report on those financial statements was unqualified and did not contain a statement under section 237(2) of the Companies Act 1985. 2. TAXATION (Unaudited) (Unaudited, (Audited, restated) restated) 6 months ended 6 months ended 12 months ended 30 June 2006 30 June 2005 31 December 2005 £ £ £ Total taxation charge/(credit) 292,538 144,848 (301,829) The total tax charge is based upon an estimated effective tax rate for the period of 36% on profit before tax. The estimated effective tax rate is higher than the standard rate of 30% due to the non-deductibility of goodwill arising on consolidation. The prior year was a credit of £301,829 due to the recognition of a deferred tax asset in respect of recoverable trading losses and capital allowances exceeding book depreciation. 3. EARNINGS PER SHARE (Unaudited) (Unaudited, (Audited, restated) restated) 6 months ended 6 months ended 12 months ended 30 June 2006 30 June 2005 31 December 2005 £ £ £ For basic earnings per share Profit for the financial period 514,437 404,285 1,604,409 For adjusted earnings per share Profit for the financial period 514,437 404,285 1,604,409 Add back amortisation of goodwill 226,948 130,590 284,131 Add back FRS 20 share based 46,769 26,876 67,947 payment charge Less tax credit for recognition - (42,568) (621,660) of losses and accelerated capital allowances Adjusted profit for the financial 788,154 519,183 1,334,827 period Weighted average number of shares Number Number Number of shares of shares of shares For basic earnings per share 27,292,982 21,138,063 23,466,432 For diluted earnings per share 29,130,263 22,892,757 25,026,381 4. Intangible fixed assets Purchased Goodwill on Total goodwill consolidation £ £ £ Cost At 1 January 2006 801,454 5,090,828 5,892,282 Additions (see note 7) - 7,087,315 7,087,315 At 30 June 2006 801,454 12,178,143 12,979,597 Amortisation At 1 January 2006 92,223 746,164 838,387 Provided in the period 20,036 206,912 226,948 At 30 June 2006 112,259 953,076 1,065,335 Net book value at 30 June 2006 689,195 11,225,067 11,914,262 Net book value at 31 December 2005 709,231 4,344,664 5,053,895 5. Net cash INFLOW from operating activities (Unaudited) (Unaudited, (Audited, restated) restated) 6 months 6 months 12 months ended 30 June ended 30 June ended 31 2006 2005 December 2005 £ £ £ Operating profit 936,101 609,811 1,381,698 Depreciation and amortisation charges 274,139 167,424 354,525 FRS 20 share based payment charge 46,769 26,876 67,947 Increase in debtors (2,063,216) (700,954) (138,948) Increase/(decrease) in creditors 1,112,649 425,482 (336,173) Net cash inflow from operating activities 306,442 528,639 1,329,049 6. Reconciliation of net cash flow to movement in net (debt)/funds (Unaudited) (Unaudited) (Audited) 6 months ended 6 months 12 months 30 June 2006 ended 30 June ended 31 2005 December 2005 £ £ £ (Decrease)/increase in cash in the period (341,284) 577,439 705,634 (Increase)/decrease in trade debtor (5,726,268) 688,542 688,542 finance facilities Movement in net debt in the period (6,067,552) 1,265,981 1,394,176 Net funds/(debt) at 1 January 2006 1,316,873 (77,303) (77,303) Net (debt)/funds at 30 June 2006 (4,750,679) 1,188,678 1,316,873 7. Acquisitions PeopleCo Worldwide Ltd On 1st March 2006 the Group acquired PeopleCo Worldwide Limited for a total consideration of £4,368,812 in cash and £1,056,191 in new InterQuest Group shares issued at 50 pence each. Sand Resources Ltd On 8th June the Group acquired Sand Resources Limited for an initial consideration of £1,394,311 in cash and £355,712 in new InterQuest group shares issued at 50 pence each. Analysis of the acquisition of PeopleCo Worldwide Limited and Sand Resources Limited Net assets at date of acquisition: Book Value Adjustments Provisional fair value £ £ £ PEOPLECo Worldwide Limited Tangible fixed assets 27,908 - 27,908 Debtors 2,269,919 5,717 2,275,636 Cash in hand and at bank 211,638 - 211,638 Creditors due within one year (1,407,698) (25,000) (1,432,698) Net assets 1,101,767 (19,283) 1,082,484 Sand Resources Limited Tangible fixed assets 76,200 (17,780) 58,420 Debtors 2,299,358 2,299,358 Trade debtor finance facility (482,015) (482,015) Creditors due within one year (1,495,149) (1,495,149) Creditors due in more than one year (44,455) (44,455) Net assets 353,939 (17,780) 336,159 Total net assets 1,418,643 Goodwill arising on acquisition (note 4) 7,087,315 8,505,958 Discharged by: Initial consideration in cash 5,763,123 Initial consideration in shares 1,261,903 Deferred consideration in shares 150,000 Deferred contingent consideration 1,130,000 Costs associated with the acquisition 200,932 8,505,958 The fair value adjustments are provisional as the Directors intend to reserve their right to re-appraise fair values up until the first full financial year post acquisition. Fair value adjustments relate to a pre-acquisition profit share provision, a pre-acquisition tax refund and adjustments to the carrying value of the fixed assets on completion. 8. FRS20 'Share-based payment' FRS20 requires that the fair value of the options granted, defined at the dateof grant, is recognised in the profit and loss account over the vesting period. The Company issues equity settled share-based payments to certain employees.Equity settled share-based payments are measured at fair value at the date ofgrant, and expensed over the vesting period, based on the Company's estimate ofthe number of shares that will eventually vest. Fair value is measured by use of a Binomial model for share-based payments. The adoption of FRS 20 has resulted in a change in accounting policy for sharebased payments. A prior year adjustment has been made to the financialinformation set out for the period ended 30 June 2005 and 31 December 2005 to apply charges to the profit and loss account for share optionsgranted. The Group has recognised a total expense of £46,769 relating to equity settledshare option scheme transactions in the first half of 2006 (£26,876 in period to30 June 2005; £67,947 in year to 31 December 2005). This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
InterQuest Group